Google chairman admits he

1st June 2011

Then, the site had around 20m active users. Now, with more than 500 million and growing, Facebook has become a magnet for online advertising, and continues to stunt Google's financial growth, says the report.

Grapping with the rise of social networking sites was one of Schmidt's ‘biggest failures', adds a report in The Wall Street Journal. Schmidt said Google had missed on "the friend thing", including valuable information about who users and their friends are, which can be used to improve the information delivered to them.

As a result, Schmidt said that Google, with co-founder Larry Page now at the helm, is pushing to develop more ways to connect people with their friends and family. He added that attempts by Google to negotiate a partnership with Facebook were repeatedly turned down, with the networking site preferring to partner up with rival Microsoft, which owns a 1.6% stake in the company.

Google has ties to Facebook. One of its former executives, Sheryl Sandberg, is Facebook's chief operating officer.

However, Facebook poses another problem to Google, as much of the information on Facebook's website cannot be indexed by Google's search engine. This restriction threatens to make Google less useful as more people form social circles online which could make it more difficult for it to understand a user's personal preferences, which benefits advertisers.

Masterful16, from the Telegraph comments: "It is good that this was overseen; Google cannot create a facebook any more than Microsoft can create a Google and that is the beauty of business in the digital age; each to their own."

Tom Wright adds: "What a load of Schmidt. Google's growth is not limited by Facebook, it is limited by the number of people actively searching for something on the internet – e.g, people keying in 'cheap holidays' – there are only so many clicks they can sell. Facebook sells advertising – it doesn't 'do' search…"

Google also announced the launch of 'Google Offers', another networking service where users can receive discounts of 50% or more at local businesses. The service is based on the daily deals offered by Groupon, which Google tried – and failed – to buy last year. Google's offers initially will be available only in Portland, Oregon, before expanding to New York and the San Francisco Bay area later this year.

Schmidt said the consumer Internet today has come to be dominated by a "gang of four" companies that want to be platforms for other companies: Google and Facebook, along with Apple and Amazon.com Inc.

In his blog, John Paczkowski says in The Wall Street Journal that Google tried very hard to be Facebook's search partner, but in the end the social networking phenomenon opted for an alliance with Microsoft. He asks – Is Facebook's success a threat to Google's business? And why is it that the company appears to be chasing it these days?

Tellingly, says Paczkowski, Schmidt said the social problem Google is grappling with today is largely his fault. He said he recently looked up memos he wrote four years ago about Google needing to address online identity. "I clearly knew that I had to do something, and I failed to do it," he said. "A CEO should take responsibility. I screwed up."

LPHsays: "Interesting that Mr. Schmidt recognized online identity is important but obfuscated that there are numerous challenges that need to be addressed about identity: privacy, echo-chambers, and lack of alternative views available during a search. Personally, better identity does not lead to better search results – it only reinforces behaviors and beliefs."